Q&A: Philadelphia’s papal housing bubble has burst

 Mark Zajak and his family are offering his house in the Art Museum area for $16,000 for the week of the World Meeting of Families and Pope Francis' visit in September. (Emily Cohen/for NewsWorks)

Mark Zajak and his family are offering his house in the Art Museum area for $16,000 for the week of the World Meeting of Families and Pope Francis' visit in September. (Emily Cohen/for NewsWorks)

Back in July, NewsWorks started wondering whether Philadelphia’s papal housing bubble had already burst. 

Fast forward to the end of August. With less than one month until Pope Francis touches down in Philadelphia, there are still thousands of homes for rent, and, after reports of booked hotels and many “no room at the inn” jokes, it turns out there are rooms available.

Back in July, NewsWorks started wondering whether Philadelphia’s papal housing bubble had already burst. 

Fast forward to the end of August. With less than a month until Pope Francis touches down in Philadelphia, there are still thousands of homes for rent, and, after reports of booked hotels and many “no room at the inn” jokes, it turns out there are rooms available.

To understand what’s going on, we talked with Ian McHenry, co-founder of Beyond Pricing. The San Francisco-based startup helps hosts price their listings on sites such as Airbnb and HomeAway in exchange for a 1 percent cut of the booking revenues. Beyond Pricing launched in 2013 and began working in the Philadelphia market earlier this year.

Note: This Q&A has been edited for length and clarity. 

NewsWorks: Did Beyond Pricing come to Philadelphia because of events like the papal visit this fall and the Democratic National Convention in 2016?

Ian McHenry: Yeah, Philadelphia was a really interesting market especially because of the papal visit. It’s not one of Airbnb’s largest ones. It’s around the size of San Diego, so, sizewise, it wasn’t really exceptional, but the papal visit was actually really interesting because it’s one of these once-in-a-lifetime events where it brings a ton of supply into the market because the hotels sell out really quickly and a lot of people start listing [on] Airbnb in hopes of getting these really high prices, thousands of dollars a night. For events like this, the Superbowl, Grateful Dead’s final concert, it really has interesting dynamics in terms of both the demand, which nobody knows what the demand will be, and the supply, which changes every day.

NW: But now it’s seeming the demand for the papal visit really isn’t there and even hotel rooms are still available. What’s going on?

IM: Yeah, this happens a lot. One thing to note, too with the hotels – when they sell out, sometimes it’s not people actually booking it. It can be that hotels just block off the whole period because they’re going to wait and open up that availability closer to the last minute, which is probably what you’re seeing here with hotel rooms suddenly becoming available when they were sold out before. You also sometimes have wholesalers that will buy those rooms and will resell them to guests later, so there’s actually speculation in the hotel market.

So when that happens and everything sells out, it makes all the headlines, and everyone starts seeing people listing their places for thousands of dollars. They think, “Wow, if my neighbor can list their place for that, then I can, too.” The problem is most of these reports don’t include people that actually got bookings at those high prices, and so you have this inflated sense of what people can charge without any real data around what people are actually getting bookings for.

NW: I assume that’s where you guys come in. Do you have a sense of how much money people who’ve gotten bookings are charging?

IM: It varies by the day. Early on, people went to Airbnb and would book things that were relatively high [in price], but as more supply came onto the market, prices kind of got pushed down again, so we see this sort of fluctuation. They announce it, hotels sell out and get booked or blocked, people panic that really want to come early on … and then we see a sellout on Airbnb at really high prices.

Then, that prompts a bunch of supply to come onto the market, which brings prices back down again from what the clearing price should be, but other people will not lower their prices when that happens. That’s what you see now, which is thousands of units out there listed at prices that really won’t get booked.

The average price right now is approaching $800 a night, which actually isn’t really competitive even with hotels. So we think either people will have those places sit empty, or if they really want to get it booked, they’ll need to drop those prices.

NW: So for people who are still wondering whether to list their homes for rent, would you tell them to just forget it?

IM: I’d say just be reasonable with your expectations. Ballpark average for a one-bedroom in Philadelphia is like $190 or so. Again, it always varies with how nice it is just like it varies with hotels. For the visit, we’re seeing premiums maybe of 40 percent, depending on where in the city you are, but you’re not going to make $1,000 a night.

The people who made plans to come from far distances, they’re probably the ones staying for a longer period of time. If you’re hoping for a last-minute booking, it’s probably going to be people in the Greater Philadelphia area, mid-Atlantic who decide to come in and see the pope, so they’ll likely stay for fewer nights, so definitely dropping your minimum stay there makes sense.

It’s not a gold rush. You should do it for a little extra money and for the joy of helping people out that need a place.

NW: Has the papal housing bubble burst?

IM: Yes, I would say it has. Like any kind of housing bubble, there’s a ton of supply in the market and not as many people wanting to stay in those accommodations. So if you want to call it a bubble, yes, I would say it has burst. I would say people just need to be a little bit more reasonable with their expectations. 

Want a digest of WHYY’s programs, events & stories? Sign up for our weekly newsletter.

It will take 126,000 members this year for great news and programs to thrive. Help us get to 100% of the goal.